As of April 2018, I have life insurance, which is a pretty big deal to me. I don’t think I’ve ever had life insurance before, unless it was through an employer. Whaaaaat?! How’s that possible, you personal finance blogger you?
Education, or lack thereof, about life insurance products, when life insurance is necessary, what it takes to qualify for life insurance, and how much life insurance one needs…that’s what I was missing prior to last summer.
When a couple of well-known personal finance bloggers came to town for a visit, we somehow struck up a conversation about life insurance. You know…totally normal dinner conversation.
Three out of four in the group had adequate life insurance in place.
Guess who didn’t?
When we talked about income replacement in the event of death, I realized that Garrett would still have to work in the event of my demise because I lacked life insurance.
Fortunately, I lived to sign up for a life insurance policy, so he’ll be OK.
When should I have signed up for life insurance?
Back when we were in a lot of debt and I was a few years younger.
Life insurance’s purpose is income replacement, so if one of us passed away while we were in debt, life insurance could have eliminated debt and provided some comfort while grieving.
Fast forward to 2018 and I mustered the courage necessary to call my insurance agent and ask her to sell me a product because the process for buying insurance online was miserable.
When I attempted to apply for insurance online through a couple of well-known websites, I ran into some trouble. Life insurance applications ask lots and lots of medical questions in order to assess risk — too risky, no insurance. My online applications required “additional information” and “medical exams.” Despite supplying additional information, I still couldn’t proceed to getting estimates without scheduling a medical exam. Argh!
Thankfully, my insurance agent is a really, really nice person and she tried to make the whole process as simple as possible. She asked all the right questions, the ones I researched in advance of the call. She realized how anxious I was talking about my own death, my dad’s death, etc…so she didn’t press me to proceed in the first call. She sent through the first part of my application to the underwriter and said she’d get back to me.
Apparently, when a parent passes away prematurely, it doesn’t bode well for the adult child applying for life insurance. I was told that I might not qualify for a low rate because my dad passed away at age 58. I was livid, so I argued for why that was ridiculous. I shared with her my dad’s history and she pushed the underwriter to consider extenuating circumstances. I didn’t hear anything back.
While waiting for the medical exam to be scheduled, I considered abandoning the process because my agent said that preliminary quotes indicated that I might have to pay more than $600 a year for something I was only going to need for several years. Why should I pay a penalty?!
Fortunately, the medical exam and blood work were clean, so I qualified for the lowest premium they could offer a 32-year old female: $415 annually. Acceptable.
Here’s what I wish I had done differently with life insurance.
1. Applied earlier in life
Life insurance is cheaper for younger people, something I wish I had taken advantage of.
2. Applied when we had debt
Even if I hadn’t applied for a policy in my early 20s, I should have applied in my late 20s when we married and found ourselves in debt.
3. Applied when we had first considered life insurance
We tried applying for life insurance about five years ago. The insurance agent (different person) told us that only Garrett needed life insurance because his income was much higher than mine and he would be OK without me. True story. I was so mad we didn’t proceed.